India Expands Credit Relief, Unveils New Covid Recovery Aid

A health worker wearing personal protective equipment stands next to oxygen tanks at a Covid-19 health center in New Delhi. (Photographer: Sumit Dayal/Bloomberg)

India Expands Credit Relief, Unveils New Covid Recovery Aid

India unveiled more support measures for the pandemic-hit economy, including a 50% expansion in its emergency credit program, as well as support for the health care and tourism sectors.

The announcement Monday by Finance Minister Nirmala Sitharaman comes as India’s states start lifting restrictions amid a decline in coronavirus infections after the country suffered the world’s worst Covid-19 surge.

The measures will support Asia’s third-largest economy as it begins to show signs of recovery after a record contraction during the first wave of the virus last year and a second, much more intense wave earlier in 2021.

The expansion in the loan guarantee program to 4.5 trillion ($60 billion), from 3 trillion rupees, was announced along with other pledges Monday by Sitharaman to scale up medical infrastructure and provide micro-financing to 2.5 million people, among other steps. The government also extended the loan guarantee program to the tourist sector, after last month widening it to airlines and hospitals.

The credit program supplements separate measures last month by the Reserve Bank of India to boost credit for health care services and provide fresh lending to vaccine-makers. It provided an on-tap liquidity window for banks worth 500 billion rupees to extend credit to health services and vaccine manufacturers until March 2022.

The measures could provide a relief of about 6.29 trillion rupees to the economy, Sitharaman said, without specifying their impact on the fiscal deficit.

Sovereign bonds ended the day lower, as did the benchmark stock index, with the yield on 10-year bonds rising by three basis points to 6.06%, while the rupee was steady at 74.19 per dollar.

Other measures announced Monday include:

  • Expanded credit guarantee program includes 500 billion rupees for the health sector
  • Additional health care spending this year to focus on children
  • Free tourist visas for 500,000 visitors, which could have a financial impact worth 1 billion rupees
  • Incentives for creating new jobs extended to end-March 2022
  • Facilitate micro-finance loans to 2.5 million persons, with guarantee up to 75 billion rupees
  • Provide 880 billion rupees of insurance cover for goods exporters

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